Lean Manufacturing

Applying Lean Manufacturing Initiatives to Workforce & Expense Management

Today's successful manufacturing organizations need to be agile and alert. Finding creative and efficient ways to control costs and meet budget requirements means process improvements that address changing business needs while being responsive to market fluctuations. For manufacturers with large, diverse workforces, better management of employee related costs is often the single most impactful way to support the principles of Lean Manufacturing and create lasting value for customers.

Executive Summary
To meet the challenges of doing more with fewer resources while remaining competitive and increasing efficiencies, many manufacturing organizations have embarked on Lean Manufacturing Initiatives that focus on eliminating all waste in the manufacturing process. During the normal course of business, even the most disciplined manufacturing firms find themselves with an overproduction of goods leading to unnecessary and costly inventory, a mismatch of demand with output levels and inefficiencies related to both the manufacturing and distribution processes. These lean manufacturing initiatives and strategies can also be effectively applied toward a manufacturer's largest controllable expense - its workforce. All too often, companies do not fully recognize or utilize the skills and capabilities of their own employees.  There are significant business advantages and savings inherent in having the right people with the right skills available at the right time and at the best possible cost.

World-class manufacturers share a core focus on innovation, responsiveness, quality and cost effectively meeting demand.  Often utilizing ‘best-of-breed’ specialty solutions, these firms leverage technology for maximum efficiency and contain costs through a manufacturing process and supply chain network that ultimately serves to enhance business performance.  Empowering the workforce adds strategic value by streamlining supply chain, manufacturing and customer-centric processes to meet and exceed increasing customer expectations. People are critical to driving business performance and workforce optimization is a key element in maintaining competitive differentiation.

Automated enterprise-class workforce and expense management solutions help manufacturers reduce payroll preparation time, improve payroll accuracy by 1-5% of gross payroll and optimize organizational performance, productivity and profitability. Robust workforce and expense management solution components consisting of time and attendance, business expense management and employee scheduling and optimization solutions, that are 100% Web-based, fully integrated and scalable, help manufacturing organizations meet ongoing business challenges by:

• Better management of a diverse and distributed workforce
• Generating tighter overtime control with reduced payroll inaccuracies
• Driving productivity gains through effective and efficient employee scheduling
• Supporting systems integration to ERP, work order and payroll
• Addressing pay, work, accrual & union rules while complying with regulatory requirements
• Ensuring compliance with FMLA, FLSA and Sarbanes-Oxley
• Increasing efficiency while modernizing workforce and expense management processes to meet the needs of a diverse end-user community

This paper examines lean manufacturing workforce management initiatives, the opportunities and benefits they provide and the enterprise applications available to manage and support them.

Take Control Where It Matters Most

Effectively controlling costs and efficiently deploying a large diverse workforce depends on an organization's ability to properly schedule staff, control and track time and attendance, eliminate payroll inaccuracies and integrate with existing business applications. Organizations that have implemented lean manufacturing initiatives realize the value of workforce and expense automation processes in several vital areas of their operations.

• Reducing Operating Expenses by Controlling Labor and Expense Costs

 

Labor and expense costs make up the largest part of a manufacturer’s cost of goods sold.  To remain competitive, firms need to control and reduce costs to a manageable level that does not negatively impact product quality.  To achieve better cost control, manufacturers with integrated and automated workforce and expense management systems are able to:

• Track labor costs in a variety of configurations including across locations, cost centers, positions, multiple work orders, departments and business units
• Staff to business needs to minimize or eliminate potential overstaffing and coverage gaps
• Address rate progressions, position step-ups/downs, departmental cross charging of labor
• Manage highly accurate Activity Based Costing (ABC) to know the real labor costs in process
• Automate the entire expense reporting cycle from report creation and workflow approval through audit and reimbursement
• Automate union contract compliance

2.   Improving Accountability and Compliance

The regulatory environment continues to pose demands and challenges on businesses that did not exist even five years ago.  Compliance with external and internal regulations has become critical for a firm’s survival.  The documentation and recordkeeping requirements of this increased level of regulation need to be managed as closely as the production process.  Manufacturers can best meet regulatory demands through automation of the following:

• Standardize and automate workforce management processes across each plant or location
• Support union contracts and complex business processes with workflow capabilities to manage pay, work and union rules, scheduling, and accruals
• Support best-in-class corporate quality initiatives by measuring time, attendance and scheduling performance while reducing payroll inaccuracies and standardizing scheduling across business units
• Achieve greater control over costs, improved compliance and increased visibility into operations through employee business travel expense data capture, reporting, validation and documentation

3. Increase the Accuracy and Agility of Production Scheduling

Making plant operations more flexible and responsive through lean initiatives is a fundamental priority. For global companies, it is also crucial to apply lean thinking to the broader, global supply chain that includes the workforce. Responsiveness to demand fluctuations and market opportunities by having the right products available at the height of market demand has always been the desired outcome of production scheduling.  Manual or semi-automated workforce systems do not offer the real-time responsiveness needed and can cause lost sales and revenues. Manufacturers can best meet production requirements and market demands through fully automated systems to:

• Streamline operations through automated scheduling
• Meet production demands while balancing cost control and efficiency
• Deploy the right mix of people on fixed or rotating schedules to move orders out the door while responding to demand fluctuations
• Focus on leveraging real-time information for better management decisions
• Improve employee satisfaction with schedules aligned with employees’ work/life preferences
• Control scheduling variations with 'best practice' templates that reflect the most efficient staffing models
• Find the right substitute at the best cost when managing unexpected absences
• Provide support for overtime equalization by assigning the lowest cost resource when scheduling overtime

Manufacturing Organizations Maximize Service and Productivity

Any system that requires extensive training or that takes too long to deploy is not a 'best practice' solution. Successful Workforce and Expense Management solutions should maximize the potential benefits by fostering rapid adoption through ease-of-use along with offering a positive user experience.  In addition, rapid initial return on investment (ROI), along with lifecycle maximization of ROI, are key factors to look for when selecting automated workforce and expense management systems.  System providers need to know a firm’s goals and expectations so they can support the business and develop the most cost effective implementation plan to take full advantage of the technology, minimize TCO (Total Cost of Ownership) and exceed business objectives.

Enterprise-class solutions give manufacturers the power to accurately manage schedules and time and attendance for all employees and contingent workers.  Doing so means businesses can adhere to lean manufacturing goals by effectively staffing peak periods and addressing special scheduling situations to ensure improved customer satisfaction and increased operational efficiency. In addition, solutions for complex, mid- to large tier manufacturers need to streamline operations, increase responsiveness and agility and reduce payroll costs. Automated Workforce and Expense Management solutions will help to improve business performance and productivity – whether the organization is regional, national or global - while dramatically building employee productivity and satisfaction.
 

Business Expenses: Making the Second Largest Controllable Expenditure a Top Priority

After labor costs, employee business expenses are regarded as the second largest controllable expense. Expense Management Automation (EMA) solutions are increasingly recognized as critical components in controlling costs and aligning regulatory requirements with company expense policies and improving bottom line performance.  Employee expenses are no longer limited to travel and entertainment costs paid by the employee and reimbursed by the company, but also include expenses and payment options from the entire range of employee discretionary expenses including office supplies, mobile phones, meetings, MRO, p-cards, corporate payment cards, fleet cards, direct vendor billing and more.   

Add to the mix a growing number of mobile workers, rising costs of travel, tighter government regulations and uncertain economic conditions.  As a result, companies have come to realize that enterprise-wide technology solutions are no longer luxuries but necessities.  Optimization of administrative and back office processes associated with employee expenses has taken on a new urgency as firms realize the need to better manage and control escalating employee business costs.  Visionary companies rely on highly acceptable, user-friendly, intuitive, best-of-breed technology solutions that deliver bottom line results along with a rapid return on investment (ROI). 

Expense Management Automation solutions gives manufacturers the power to attack the high cost of expense processing at its source: the employee’s “point of spend.”  These solutions allow automation of the entire expense reporting cycle from pre-trip authorization, expense report pre-population, and workflow approval and report creation through to travel booking integration, audit, reimbursement, receipts management and post-payment reporting and analysis.  EMA solutions handle every aspect of employee business expense processing and increases efficiencies when integrated with existing back end General Ledger systems.

The Business Challenges of Mobility

Often spending more time outside the plant or office than within, business travelers, especially sales representatives, technicians, managers and field employees, constitute the mobile workforce. Manufacturing firms today are facing increased requirements and challenges to enable and empower their expanding mobile and/or ‘untethered’ workforces that are not connected to the company network during the course of the work day. These challenges go beyond delivering Internet or email access to mobile workers; there’s a need to provide select, critical business applications to this user community in a consistent, secure and robust deployment. The goal of these efforts is to bring the enterprise applications to these mobile workers wherever they are rather than forcing the mobile workers to the enterprise applications.

Mobile and remote workers have the same pressures as on-site employees to comply with existing corporate policies, approvals and business processes. These employees need to have secure access to enterprise-class applications in real-time to help them perform productively and effectively, while adhering to corporate policies and standards. Whether it is a day trip for a regional plant manager or an employee working on an oil rig, best-in-class solutions offer support for time capture, employee self-service, labor distribution, expense reporting and management approvals to address the needs of the growing mobile workforce.

Match Labor Supply with Business Demands

Without a system in place, the tasks of staffing, managing absence replacements and responding to fluctuating business demands are laborious and can be quite inefficient. Visibility into resource availability is limited and without a dashboard view of the current, available workforce, businesses may not know if they’re paying for unnecessary overtime or scheduling employees to work hours beyond what is considered safe or within contractual guidelines.

With an automated workforce management system in place, employers benefit from the ability to track key performance indicators (KPIs) that provide real-time visibility into the status of cost and sales metrics allowing for the most productive and cost effective staffing. Enterprises can optimize schedules based on business demand, and as a result, realize an increase in productivity, while enhancing operations and ensuring the right resources with the right skills are available when and where they are needed.

Scheduling software delivers real-time information that enables manufacturing firms to allocate staff according to employee-to-revenue ratios, or other relevant metrics, such as placing workers in certain areas, locations or in departments to accomplish the tasks or service that generate better bottom-line results within budget allocations.

Consider the example of a manufacturing plant that needs to run production on a Saturday. From a scheduler’s perspective, they need to not only identify workers who have the right skill sets but also  determine who is already scheduled to work as opposed to scheduling others whose Saturday hours may result in time and a half or double time. By utilizing a software solution for this type of scheduling situation, managers can easily gauge their resource availability and consider the costs of the talent needed to ensure that production schedules are met.

A dashboard view of the workforce and insight into the skill sets of the available staff enables managers to make the most effective staffing and talent management decisions. This enterprise-level visibility ensures better alignment with contract requirements, worker certifications and skills and shifts schedules to meet forecasted demand, further enabling companies to meet their business objectives.

A workforce management solution with scheduling optimization also eliminates errors that result from time-consuming manual processes. Along with increased accuracy from electronic data entry, a workforce scheduling solution ensures time and attendance entries are correct, reduces time theft (resulting from extended breaks, tardy arrivals and early departures) and “buddy punching” (when one employee “clocks in” for another), while enforcing adherence to business rules and facilitating compliance with government regulations, as well as with internal policies and union requirements. Since these business rules drive accruals, paid time off, time accrued towards participation in retirement programs and leave management, having them properly tracked and validated can result in greater accuracy of benefits accruals and lower payroll costs.

The Solution:  Versatile and Flexible Technology

When choosing a solution, companies look for applications that meet their cost requirements. One option is the traditional in-house license fee model. A more desirable alternative is the flexibility of either an in-house model or an off-premise Software-as-a-Service (SaaS) model. The SaaS On Demand delivery model speeds the implementation process at a more affordable price. As companies evolve, having this flexibility ensures the solution will continue to meet business needs.

As competition intensifies, manufacturers are turning to technology to improve business processes whenever and wherever possible. Data intensive manual or semi-automated timekeeping, scheduling and expense report processing practices are often prone to error and do not provide the flexibility to address the responsiveness a manufacturer needs to display to remain competitive in today's business environment. Increased agility, enhanced mobility and self-service and workflow capabilities are technology facilitated gains that can contribute to higher customer satisfaction levels, greater operational efficiencies and tighter control of labor costs for manufacturers.

1) Trendline Survey, American Payroll Association, June 2008